Woodside chief says service providers face greater competition in an evolving marketplace.
Woodside chief says service providers face greater competition in an evolving marketplace.
WOODSIDE Petroleum chief executive Peter Coleman has warned local businesses they need to prepare for a wave of multinational players that will make the Western Australian market far more competitive.
Speaking at a Consult Australia event last week, Mr Coleman said service businesses needed to recognise the rapidly changing marketplace and evolve, just as Woodside was seeking to do with its recently announced strategic shift.
He said Western Australia’s energy sector was no longer the distant haven that had allowed Woodside and local oil and gas-focused service providers to quietly enjoy the fruits of booming LNG prices.
“You just need to look at the marketplace itself, five years ago we were in sleepy hollow,” Mr Coleman said.
“Perth is the city furthest from anywhere; in the oil and gas world it is the city furthest from what is really the home of oil and gas, which is Houston; it is a long way away.
“If you went there (WA) in the last five years and looked at the companies that had based themselves in Perth in my sector of the business, and this is an interesting segue for you to think about your business, it was two; now I have got everybody.
“They are moving into my neighbourhood and my post code and they are kicking sand at us, and they are competitive; they are the very best.
“We have not got some lazy ones in there.
“That will make Woodside better, we welcome the competition; it’s a free gym ticket for me.”
Ten months after arriving at the helm of Woodside from global giant ExxonMobil, Mr Coleman is steering the oil and gas giant to look outside its current operational areas of northern Australia, from the North West Shelf to the Timor Sea, in a bid to diversify.
While observers of Woodside might view this strategy as something of a back-to-the-future move – following the decision by previous CEO Don Voelte to exit from several messy foreign ventures and concentrate on local developments, including Pluto, Browse and Sunrise – Mr Coleman was adamant the company could not simply sit back and enjoy the rich cash flows generated from its two operating LNG projects.
“There are a lot of new players coming into our sandbox,” Mr Coleman said.
“Almost everyone in our peer group that we measure ourselves against are trying to get into LNG, and some of them will, and some of them will be successful.
“So our competitive group in the next five years will probably double in the LNG space, so we need to maintain differentiation.
“What differentiates us today will become average tomorrow and next week we’ll fall behind.
“We need to continue to lead.”
That meant a more balanced portfolio of assets from exploration through to production, and seeking high value opportunities – possibly outside Australia and potentially onshore.
In striking out to new fields, Mr Coleman said Woodside had to be smart about developing the capability to do that successfully, so the existing business was not eroded by fresh ventures.
“We have one of the best portfolios going around, we don’t want to dilute the value of the portfolio,” he said.
Mr Coleman said this strategy and capacity to execute it was being developed as part of an internal review of the business. Woodside announced the review last year, when it brought in management consultants Bain & Co.
In his address, Mr Coleman said the strategy did not mean ignoring WA, where Woodside’s experience and knowledge was still a core strength of the business.
He also acknowledged the difficulties in seeking to graze in new pastures.
“Australian companies have not been very successful, in general, at going offshore,” Mr Coleman said with regard to investment in foreign markets.
“That is not just oil and gas; look across most industry sectors, there are very few companies that started in Australia and have become truly global in what they do.
“That is something we need to improve and we understand that.
“Before we spend one dollar we are going to make sure we can do that and do that well.”
Returning to his theme of global competition, Mr Coleman suggested it would have ramifications not just for Woodside but for local services firms, as major global consulting firms enter the market on the back of existing arrangements with major oil and gas business.
“What I do guarantee is competition will come and it will continue to come,” Mr Coleman said.
“These companies that I am competing with will bring more competition with them; they have global MSAs (Master Service Agreements) in place, they will bring those global relationships with them.
“They will not competitively bid, they will appoint, because they are comfortable with their relationships and the amounts involved are enormous.
“They are letting people loose on things where the dollars are enormous.
“They are looking for people who can deliver and, in that instance, the thing that is most important will be quality. Quality, quality, quality.
“When we look at the rework on our projects at the moment it is absolutely unacceptable.”
Mr Coleman said WA companies should stay in the race to compete but they needed to ensure the quality of their work was of the highest order.
“When you are paying 10 times on an hourly basis for someone to do the same work in Australia as they do in Qatar, then the room for error is very, very small,” he said.